1. Field of the Invention
The present invention relates to a system that maximizes the discount rate structure for merchants for financial transactions, either sales or credit transactions, that require an authorization including credit card transactions, debit card transactions, pre-paid credit card transactions, gift card transactions, electronic presentation of check transactions, and any other types of transactions that utilize a discount rate compensation method for the entity performing the processing of the financial transactions.
2. Background of the Prior Art
Financial transactions that utilize an authorization of the type just described are integral to the stream of commerce as billions of dollars worth of such transactions are processed on a daily basis. As seen in FIG. 1, this type of financial transaction begins with a sale (or credit). The appropriate credit instrument, credit card, debit card, pre-paid credit card, gift card, electronic presentation of a check, etc., is presented to the merchant, and the merchant obtains an approval code. If no approval code is granted (for example, the credit card is over limit, the gift card lacks a balance, etc.,), no approval code is given and no transaction occurs. If an approval code is given, the transaction is completed, and the financial transaction is added to a batch. At some point, with each transaction, hourly, daily, the number of transactions batched has reached a threshold, etc., the batch, consisting of all unsettled yet approved financial transactions is settled. The batch is submitted to a processor for processing of the transactions and funds are deposited into the merchant's account. At the end of each billing cycle, typically monthly, a fee is charged against the merchant's account by the entity performing the processing of the batches. This fee, which is often termed a discount rate, is a percentage of the entire dollar amount of the transactions processed in each batch during the billing cycle. The discount rate is typically made up of several components such as card qualified rate, card non-qualified rate, debit signature qualified rate, debit signature non-qualified rate, authorization fee, bill back fee, ACH fee (settlement charge), interchange fee, etc. As each one of these rates may be different, and as most batches trigger more than one of these rates, the term discount rate can be more properly called discount rate structure.
Processing occurs on a merchant computer or server or across a network.
For very large entities, such discount rate structures as negotiated with banks or other financial institutions as part of an overall elaborate intertwined relationship between merchant and financial transaction processing institution. Such negotiations are relatively sophisticated and are monitored regularly by merchant and institution alike. However, for smaller entities, such as the merchant that may have one or a handful of restaurants, such entities do not have the market presence to be able to wring the strongest deal possible from the financial transactions merchant processor. Typically, such merchants shop around local banks and other merchant processors to see who others the most favorable rate as predicted by the merchant for the types of transactions that the merchant expects to encounter. Once a merchant processor is selected, equipment and/or software is obtained from the processor, and the merchant conducts its business. Many business owners occasionally check their billing statements against competing merchant processors to see if a better discount rate structure can be obtained. If a merchant processor with a better rate structure is found, the merchant switches to the new processor, canceling the relationship with the old processor.
While such a merchant processor switch may be more profitable to the merchant, it may not be without problems. In many cases, new equipment and/or software needs to be obtained from the new processor and installed, often accompanied by one or more visits from the new processor's computer nerds. Additionally, as the discount rate is relatively complex, it may be difficult for a merchant to judge whether a potential new processor does indeed have a better discount rate structure relative to the existing processor, especially if the types of authorization transactions undertaken by the merchant evolve, with the attendant shift in the discount rate structure applied by a processor against the merchant's batches. Different transaction types, as well as different transaction sizes, result in different rate structures from a given merchant processor so that while a given merchant processor may appear to have the best discount rate structure for a merchant, the type and style of the merchant's transactions may not achieve the best discount rate structure from this merchant processor relative to the discount rate structure of another merchant processor.
What is needed is a system whereby a merchant without the market presence to negotiate favorable terms for merchant batch processing of financial transactions that require authorization can achieve the best available overall discount rate structure for the merchant's transactions without the need to manually monitor and analyze the various transactions conducted by the merchant and sent out to a merchant processor for batch settlement. Such a system must be relatively simple in design and implementation so as not to unduly burden the merchant nor require the employment of additional IT personnel.